Insolvency Proceedings can be restored Despite absence of Revival Clause in Settlement Agreement: NCLAT [Read Order]
The Respondent cannot be allowed to blow hot and cold in the same breath
The New Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has held that the Insolvency Proceedings can be restored despite absence of revival Clause in Settlement Agreement
The appellant filed an application under Section 9 of the IBC, 2016 for the resolution of its debt of Rs. 1 Crore 49 lakhs. During the pendency of the application and after the appearance of the Respondent, the Tribunal passed the order that the parties have decided to settle the dispute by way of a settlement agreement.
The parties entered into a Memorandum of Understanding (the ‘MoU’) on 06.11.2020. According to the appellant, the Respondent committed breach in the terms and conditions of the MoU, therefore, it filed the application bearing Restoration Application/12(AHM)2024 which has been dismissed by the Tribunal only on the ground that there was no clause in MoU that in case of breach of terms and conditions by the Respondent, the main petition bearing CP (IB) No. 239 of 2020 can be restored on an application filed by the appellant.
Stay Ahead with Expert Tax Insights – 2025 Edition
Counsel for the appellant has argued that the Tribunal had already recorded an order on 16.02.2021, referred to above, in which it had specifically observed that if the settlement fails then application for revival of the main petition can be filed. It is submitted by the appellant that it would be cheating on the part of the Respondent to enter into a MoU to wriggle out of the rigours of the application filed under Section 9 on the basis of which the Respondent could have been pushed into CIRP and then not honouring the terms and conditions and contesting the application filed for restoration on the ground that there is no such clause in the MoU for revival of the application in case of breach on its part.
On the other hand, Counsel for the Respondent has argued that as a matter of fact the entire payment has been made, therefore, there is no need for revival of the application. In rejoinder, Counsel for the appellant has submitted that the Respondent has paid only Rs. 39,40,000/- and Rs. 1,10,22,721/- is still to be paid under the MoU.
The bench of Justice Rakesh Kumar Jain (Member-Judicial), Justice Mohammad Faiz Alam Khan (Member-Judicial), and Indevar Pandey (Member-Technical), observed that the Tribunal has committed a patent error in dismissing the application of the appellant for restoration of the main petition on the ground that there was no clause in the MoU for revival of the application in case there is a breach of terms and conditions of the MoU by the Respondent.
The Tribunal itself had earlier passed an order on 16.02.2021 and the Respondent cannot be allowed to blow hot and cold in the same breath because the Respondent for avoiding the admission of the application filed under Section 9 by which it could have slipped into CIRP entered into MoU and agreed to pay the entire debt of the appellant but later on stopped making the payment which gave a cause of action to the appellant for revival of the application.
The appeal was allowed and set aside the impugned order.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
